Procedural Posture

Petitioner property owners sought a writ directing respondent Superior Court, San Diego County (California) to vacate its order granting insurer’s general demurrers to causes of action raised by petitioners, who sought recovery of pre-tender defense expenses in an underlying action against petitioners for their alleged failure to disclose defects to the buyer of their home.

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Overview

Petitioner property owners were sued for alleged failure to disclose defects to the buyer of their home. Petitioners engaged counsel to review the claims, while at the same time searching for insurance policies that might provide a defense. Petitioners subsequently tendered defense of the action to insurer, who after initially declining to defend informed petitioners that it would provide a defense and would pay attorneys fees and costs. However, insurer refused to pay attorneys fees and counsel for legal services initially provided to petitioners. Insurer filed an action seeking a declaration that it had no duty to defend, and petitioners cross-claimed as to breach of contract. Insurer demurred on the basis that an insurer was not obligated to pay pre-tender expenses, which was sustained by respondent trial court. Petitioners sought review, and the court entered a writ ordering respondent to vacate its order. The court held that a demurrer was not the proper method to determine a factual dispute. The court also stated that a fact question existed as to whether the incurring of expenses by petitioners was voluntary, which was prohibited by the insurance contract.

Outcome

The court issued a peremptory writ against respondent court directing it to vacate its order sustaining insurer’s demurrer on petitioner property owners’ claims against insurer for pre-tender expenses. The court held that a demurrer was not the proper method for determining the truth of disputed facts. The court also stated that petitioners raised a fact question in their complaint about whether they voluntarily incurred pre-tender expenses.